## Assessing House Prices with Prudential and Valuation Measures

_IMF Working Papers, March 18, 2019_

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**Canonical URL:** [Assessing House Prices with Prudential and Valuation Measures](https://www.imf.org/en/publications/wp/issues/2019/03/18/assessing-house-prices-with-prudential-and-valuation-measures-46664)

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## Bibliographic details
- Authors: Michal Andrle, Miroslav Plašil
- Published: March 18, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498302814.001

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### Overview
- Purpose: Provide tools for assessing house prices and housing valuation using widely available data and without complex econometric models.
- Two main approaches developed:
  - Borrowing capacity approach: The borrowing capacity of households, together with their down payment, implies how much housing they can attain.
  - Intrinsic value approach: Property value is viewed as a discounted present value of adjusted net rental income.
- Intended users: Households, financial markets, and macroprudential authorities.
- Empirical illustration: Analysis of housing prices in the Czech Republic to assess the degree of market over- and undervaluation.
- Date: March 18, 2019

### Methodologies
- Borrowing capacity approach
  - Uses household borrowing capacity and down payment data to infer attainable housing amounts.
- Intrinsic value approach
  - Values property as the discounted present value of adjusted net rental income.
- Data and modeling stance
  - No complex econometric model required.
  - Relies only on widely available data.
- Purpose of indicators
  - Guide understanding of house price developments for households, financial markets, and macroprudential authorities.

### Key Findings and Analytical Claims
- The paper develops indicators that can:
  - Inform assessments of house price valuation (overvaluation and undervaluation).
  - Be applied without sophisticated econometric techniques.
- Application: Concepts are applied to the Czech Republic housing market to illustrate measurement and assessment of market valuation.

### Policy Implications and Use Cases
- Indicators can guide:
  - Household decisions regarding affordability and down payments.
  - Financial market assessments of housing-related risk.
  - Macroprudential authorities in evaluating housing market vulnerabilities and policy calibration.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2019/03/18/assessing-house-prices-with-prudential-and-valuation-measures-46664_